Coronavirus, Debt Recovery & Contracts – Q&A
The outbreak of COVID-19 has halted a huge amount of trade worldwide. Within the UK, we have seen the closure of pubs, restaurants and cafes since 20th March. Further, a national lockdown was imposed from 23rd March. This has had an unprecedented effect on all businesses within the UK. As a result, contracts can’t be fulfilled, holidays have been cancelled and both consumers and commercial entities are suffering. We have received numerous enquiries surrounding this uncertainty, and we hope that this article will provide some guidance and clarity on some of these recurring questions.
What will happen with my contract? Do its terms still apply?
If you are unable to fulfil your contractual obligations because of Coronavirus, or your counterpart is unable to do so, there may be a serious breach of contract. A party can potentially escape liability for failing to fulfil a contractual provision through reliance on a ‘Force Majeure’ clause. This releases the contracted parties of their contractual obligations in the event of certain circumstances arising beyond their control, which make performance of their obligations inadvisable, impractical, illegal or impossible. However, this will only be available if it is expressly written into your contract, with the specific circumstances being stated.
If your contract does not expressly allow for this, you or your counterpart may be pursued for breach of contract. There has been no substantial change to legislation providing any period of stay of this type of litigation. The usual remedies remain open and available to you, you do not need to wait for this pandemic to blow over before you consider action.
Can I get my money back?
If your counterpart has failed to carry out their obligations, and as a result you have lost money, then you may be able to issue proceedings against them to recover this debt in the usual manner. The first step shall be to write to them, setting out the basis for the debt and your intended action with a formal letter of claim. It may be that this prompts a response and you are able to arrange a re-payment plan with your counterpart. If not, we can help you proceed to Court and seek a Judgment for the debt, interest and costs. Ultimately, despite the difficult times we find ourselves in, the principles of contract law (and therefore debt recovery) remain unchanged. It is also worthwhile to consider whether there is any other method of recovering your losses, for example insurance policies or, where travel is concerned, ATOL or ABTA certificates.
Is there any help available to businesses struggling to pay their debts?
If you are a business, finding yourself in difficulty during this time, you may be able to ask the Government for help. The Government website provides various financing and funding methods available. We would urge you to explore these avenues if you are having difficulty. This type of help may prevent you from falling into a situation whereby you owe money to various parties, for failure to carry out your contractual obligations.
For example, “under the COVID-19 Corporate Financing Facility (CCFF), the Bank of England will buy short-term debt from large companies. This scheme will support a company if it’s been affected by a short-term funding squeeze, and allow it to finance your short-term liabilities.” (https://www.gov.uk/guidance/apply-for-the-covid-19-corporate-financing-facility)
Are the Courts still open?
Simply – yes. HMCTS is working hard to keep the justice system open and running. There are matters which are being prioritised above others, and naturally there is a backlog forming due to this which means you can expect a longer delay in proceedings. However, the Courts remain open and are seeking to comply with social distancing measures imposed. As such, the majority of hearings are being conducted by telephone or video conference. However, if you are looking to recover a debt from somebody, you can still currently issue proceedings in the usual manner. We can certainly help you with this.
What can I do?
The usual remedies remain open and available to you. If you are owed money from an individual or company, we can help in the usual manner. The longer that trade is affected, the more likely it will be that businesses and individuals are unable to repay a debt. It is worthwhile considering action now to preserve your position, rather than allowing the situation to run on indefinitely.
Our Litigation & Dispute Resolution Team at BTMK, one of the largest in the region, are available to give you and your business support throughout this challenging time. We’re available by telephone on 03300 585 222 (24/7), by e-mail at email@example.com, through live chat on our website and through all of our social media channels.